After a dozen trips to Santiago, Pacific Hydro’s CFO Paul Townsend is still figuring out the balance between being himself and fitting into the culture. “Asking a direct question in a meeting can make someone quite embarrassed," he says.

“I liken the Chileans to the Chinese, that in some ways they’re quite proud people, and there’s a bit of face saving to be mindful of."

Townsend has found that he “needs to take some questions offline to get results".

Understanding the nuances of Chilean etiquette is tricky. While questions need to be less direct, instructions need to be more so.

“People want to be told and given direction rather than take leadership themselves," he says. This is a legacy from the Pinochet era and finds it a contrast to managing staff in Australia, he suspects.

Pacific Hydro has been in Chile since 2002. It operates five river runner hydro plants and has a wind farm in development. It derives half its revenue there, and expects that to rise to 75 per cent over five years. Domestic and commercial energy demand in Chile is soaring as annual gross domestic product grows at 6.5 per cent.

Local CEO Noortje Magis, who reports to Townsend, was born in the Netherlands but married a Chilean and has lived there for 15 years. “She brings a good mix of local orientation, but with a Western understanding," Townsend says.

Safety is a priority for Townsend, who has made it “the first agenda item in any meeting". Tunnelling in the Andes is difficult and a few months ago a tunnel collapsed – fortunately without injuries.

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Understanding the local politics takes time. Townsend has learnt it is wise to be wary of the difference between political announcements and government action. Pacific Hydro made a significant investment in capacity ponds, which store reserves of water for electricity generation, after the government announced in 2006 that it proposed to change capacity payments to make renewable energy projects more attractive. But the new regulation, which would increase Pacific Hydro revenue by up to 3 per cent, is still not enacted.

This article appears in the first edition of Financial Review Capital magazine included with the newspaper on Wednesday 18 April 2012.

See also Power purchase agreements a mixed blessing for more on funding growth in Chile. “If Pacific Hydro did not have the PPA it could only get about 40 per cent leverage on the project but as it stands it has about 60 per cent leverage." says Townsend.